Democrats resurrect Murkowski bank suit

Senator denies criticism in Dems' campaign mail-out

The Democratic Party of Alaska and a Native corporation in Nome this week accused Republican gubernatorial candidate Frank Murkowski of mismanaging funds while serving as president of the Alaska National Bank of the North in the late 1970s and early 1980s.

For more Juneau Empire coverage of the November 5 general election, please visit the Juneau Empire Elections Guide.

Murkowski, a U.S. senator, denied the charges.

Alaskans across the state received brochures by mail earlier this week from the Democratic Party, claiming that mismanagement at the bank caused Sitnasauk Native Corp. of Nome to lose tens of millions of dollars.

The flier also tied the issue to recent corporate scandals, noting, "Just like in the Enron scandal, some people lost their life savings."

Sitnasauk Native Corp. President Robbie Fagerstrom held a press conference on Thursday in Anchorage to remind the public of the events that led to the bank's closure.

"I think the bottom line is that Sen. Murkowski was the president and chief executive officer of the bank, and the bank established a trust account for the 17 villages in the Bering Strait region," Fagerstrom said. "They co-mingled the 17 villages' funds into one account, and the bank allowed the Bering Strait Native Corp. to spend our funds without our authority."

Murkowski lashed out at the Democrats on Thursday, calling on them to end the attack ads.

"The Democratic Party is making an old charge and a false charge and in this particular brochure a slanderous charge. Democrats have made this false accusation against me in every election since 1980 with no justification for their innuendo," Murkowski said in a statement.

"For the Democrats to make such a malicious accusation three weeks before the election shows how far they will go to distract attention from the issues Alaskans really care about - a sound economy, well-paying jobs, no income taxes and a safe and secure permanent fund," Murkowski said.

Charlie Cole, an attorney for the bank during the lawsuit, said under the Alaska Native Claims Settlement Act of 1971 millions were paid to regional Native corporations to be distributed to various village corporations.

Bering Strait Native Corp. oversaw the funds of the 17 village corporations and invested the money in risky ventures, including a concrete company, a trucking company, a tire manufacturer and several other investments, Cole said.

He said the investments went against the recommendations of the Fairbanks-based Alaska Bank of the North, which advised putting the money in conservative stocks and bonds, Cole said.

Bering Strait Native Corp. went to the bank for loans to pay for the acquisitions, using village corporation money as collateral, Cole said. By 1977 the faulty investments caused the bank to foreclose on the loans.

Sitnasauk sued the bank on the grounds that the institution should not have approved the loans. In 1988, after a seven-year court battle, Sitnasauk was awarded $10 million from the bank - the estimated amount that would have been returned from that corporation's original $2.3 million investment.

Cole said Murkowski was not involved in the loans and that the fault lay with the bank's trust department lawyers who approved the loans.

Fagerstrom of Sitnasauk and Tammy Troyer, executive director for the Democratic Party, disagree. They assert that as president of Bank of the North, Murkowski was aware of the risky loans but did not prevent them.

Fagerstrom told the Empire that the timing of Thursday's press conference with the Democratic mailer was purely coincidental.

Troyer said she had no knowledge of the Native corporation's press conference.

Sitnasauk decided to hold the press conference on Thursday because of calls the organization has received in the last three weeks requesting information on the lawsuit, Fagerstrom said, but he would not divulge who had contacted him.